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Settling Back Tax Debt using an IRS Offer in Compromise

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ROLE OF A TAX LAWYER, EA, CPA IN TAX DEBT REPRESENTATION AND TAX RELIEF

This article will define tax debt and tax relief, the role of representation by EA, CPA, lawyer, benefits that come with using a power of attorney, situations that they come in and some of the tax relief solutions they offer.

Tax debt is where one fails to pay taxes to the government as required by law. Tax relief is a program put in place to lessen or abolish tax debts.

Benefits of a tax relief attorney-in-fact or tax debt power of attorney

Attorney-client privilege. This concept requires that attorneys must keep confidential all the information that is given to him by the client. This is important as it enables the client to disclose all the information that he considers relevant without fear of disclosure by the attorney. This is significant because it allows the attorney to give the best advice and work efficiently. The benefit here is that this privilege does not exist in other tax professionals hence the risk of disclosure. Tax attorneys have the necessary knowledge and can offer a legally based advice. Their experience helps them provide a wide array of solutions than other professionals, and they can handle technical problems relating to tax. A tax attorney has the power to represent you in IRS and step in on your behalf on any matter of IRS this is a benefit compared to other tax professions, CPAs, EAs as the attorneys can also represent you in court on tax matters. Tax lawyers are equipped with skills that enable them to negotiate in tax related problems.

Circumstances that one needs to have a tax debt attorney

Criminal cases of tax evasion attract grave consequences and penalties. If one has committed such offense, there is a need to get a tax relief lawyer. An attorney can relief you from penalties by giving proof that tax noncompliance was founded on legitimate grounds. In most cases, a person who has committed tax crimes are likely to be investigated. It is vital to have a criminal tax attorney to represent you while undergoing questioning so that you may not end up giving self-criminalizing evidence. A tax attorney, EA, CPA is also needed in cases of the tax liens or levies. This is a situation where the IRS have the priority of your property before any debtor which ends up impairing your borrowing capacity. There is a need to find a tax debt attorney-in-fact to resolve the tax lien lest it becomes a tax levy where all your assets are seized.

Tax debt and tax relief EAs, CPAs, attorneys offer a wide range of solutions to clients. However, they are tasked to give the best solution that will address the issue at hand. One of the solutions is offering compromise settlements. This is a kind of relief which enables you to pay taxes in a lesser amount than the owed amount. This can only be possible if it can be proven that in case the IRS forcefully take taxes from you, the amount will be same or higher than the one offered in compromise settlement. This is a technical issue and requires excellent negotiation and convincing skills. Another solution is through tax planning.  A representative can assess the financial status of the client and help them to determine the best payment method to avoid incurring more debt. Another tax relief solution is through penalty abatement. For IRS to relieve one of the penalties, they must show that the excuse for noncompliance is legitimate. Tax relief lawyer, CPA, EA can best do this as they have tax knowledge, in some cases, taxpayers uses bankruptcy as a means of resolving tax debt. A person will require a bankruptcy attorney because of the complexity of bankruptcy issues.

From the above discussion, it is evident that tax debt and relief attorneys, EAs, CPAs are vital as compared to taxpayers getting resolution. This is mainly due to the complexity of tax debts and relief issues. Sound special knowledge and skill set are essential in proving or negotiating for tax relief.

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Proactive Tax Planning

We’re well aware that many people let “Tax Planning” slide down to the bottom of their to-do list when it’s not actually tax season. It’s an “out of sight, out of mind” problem.

But the issue is this: how your tax filing goes for you in the spring is *dependent* upon the financial choices you make all year. So make the choice to grab our eBook (100% FREE) for a few tips on things to do NOW that will affect your return come next April.

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Building and preserving your personal wealth requires specialized attention. You get one-on-one guidance from our experienced Blue Springs financial services firm and a comprehensive plan that helps mitigate risk, seek improved performance, and pursue growth and longevity of your wealth.

What the IRS Never Told You

Learn how to end your IRS Problems. Many taxpayers are at the end of their rope with no place to turn for solutions to ALL types of IRS Problems. You and your family can put these IRS Problems behind you, often for just a few bucks. So Don't Delay! Read This Special Report Today!

What Your Accountant & The IRS Never Told You!

Millions of U.S. citizens find themselves at odds with the IRS. In fact over $100,000,000,000 (that's 100 Billion Dollars) is owed to the IRS in taxes, penalties and interest.

Do they really think they're going to collect this money? Personally I don't think so! They know that many people simply don't have the money to pay these old tax liabilities.

But have they given up trying? Of course not!

Will the IRS just roll over and play dead on these old tax liabilities? Never ... because it would ruin their reputation.

They would lose all credibility to collect current taxes. It could cause the entire tax system to break down. It might even cause the U.S. Government to cease to exist.

So its fair to say," the IRS will not stop trying to harass taxpayers who owe old taxes!"

But how are they going to collect old taxes from the taxpayers that just can't pay? We know they won't declare amnesty, so they'll have to do something else.

Well, quietly the IRS has been trying to solve this problem of collecting old taxes from taxpayers that simply don't have what they owe ... and what they have been doing may surprise you! In fact, it shocks most taxpayers.

The IRS Has Been Making Deals!

Deals so good you may not even believe the amounts.

What would you say if I told you that the IRS has been accepting on average 13.5 Cents on the Dollar as Complete Settlement...

I mean complete! They are making deals where the total of your Taxes, Penalties and Interest owed to the IRS are completely wiped out.

So what about you? How come you haven't been told about these deals? I'm not sure why your accountant hasn't told you, other than maybe they don't know about these IRS deals themselves. Most IRS employees won't tell you because they look at this program as a give away deal and they personally don't support it.

So it's up to you to look out for yourself and see what's available.

These deals with the IRS are not for everyone. But if you qualify they are truly a once in a lifetime opportunity to get you back on your feet financially.

Let's talk about this IRS deal program and what it's called. The IRS program is called OFFER IN COMPROMISE. During the last 12 months, over 27,000 of these deals (OFFERS) were accepted by the IRS.

These deals with the IRS can take quite a while to negotiate as it not uncommon for them to take 6-9 months. But when you consider how long it took you to get into trouble with the IRS and how long it will take you to get out, 6-9 months is not a very long time.

The IRS has stringent rules for potential taxpayers wishing to present a deal to them. The most important one is that any taxpayer wishing to request a deal must have filed all of their tax returns.

Now, I know that some of you may not have filed all your tax returns, but we can help you overcome this important rule. Some taxpayers can't find all their records to file old tax returns. Don't worry we even have ways to help you.

The bottom line is that having old tax returns filed is the easy part!

Taxpayers that are in compliance with all the IRS filing rules then have to look at their financial situation to see if they are within the IRS standards for having a deal accepted.

Our firm can quickly review your financial situation and explain the IRS guidelines for having a deal accepted.

This could be a huge turning point in your life if you qualify. Can you imagine how good it would feel to have the burden of the IRS off your back. Please call me at 816-220-2001 or online to schedule an appointment.

Will Your Tax Return be Audited

Few things are more unnerving than having your tax return selected for an IRS audit. The IRS uses that "audit anxiety" to help keep taxpayers honest on their tax returns.

DIF Scores Count

The IRS evaluates tax returns based on their "DIF" scores, a set of IRS formulas known as the "Discriminate Function System." About three-quarters of all returns audited are selected by the DIF computer, which compares deductions, credits, and exemptions with the norms for taxpayers in each income bracket.

While the IRS keeps these formulas very secret, you can count on having a higher audit probability if you fall into certain categories or report certain things on your tax return.

What Interests the IRS?

Some higher risk areas are -

• Tax protests. Both the IRS and tax courts are getting fed up with what they consider frivolous tax protests. If you file a return stating that you owe no tax because the dollar is worthless or make some other such protest, you'll probably be audited.
• High Income. Because auditing higher-income taxpayers is likely to produce more additional tax revenue than auditing lower-income taxpayers, the IRS targets this category.
• Certain occupations. Taxpayers whose occupations produce cash income, such as taxi drivers and waiters, run a higher risk of being audited. Self-employed individuals, particularly independent contractors, are IRS targets for the same reason; they are more likely to have unreported cash income.
• No preparer or a problem preparer. If you have a complex return and prepared it yourself, or if your return was prepared by someone on the IRS's problem-preparer list, you are more likely to be audited.
• Certain deductions. The IRS has found it profitable to audit returns that claim office-in-the-home deductions, travel and entertainment deductions, and certain other write-offs where they feel taxpayers stretch the truth.
• Related party transactions. Taxpayers who involve family members in their financial operations are more likely to be scrutinized by the IRS. Paying wages to your children, lending money to relatives, splitting income among family members, or running a family business will make the IRS more interested in your returns.

Your Best Audit Defense

Between one and two percent of all individual tax returns filed in any year will be selected for audit.

Unless there is suspicion of fraud or substantial understatement of income, the IRS has three years from the due date of your return to initiate an audit. Typically, most returns are selected within two years of their filing date.

The best defense in an audit is a two-part strategy:

• Have supporting documentation for all deductions and credits.
• See your Tax Professional immediately upon notification that you're being audited.

An Enrolled Agent is a Tax Professional and can put your mind at ease, find the information that the IRS wants more quickly than you can, and very likely will save you money in the long run by getting a faster and more favorable conclusion to the audit.

A good tax advice does not cost you...it pays you!

Mike Mead, EA, CTC of Alliance Financial & Income tax, a boutique tax firm is an ELP - endorsed local provider by Dave Ramsey. At our firm we put our client first, we start by conducting a confidential fact finding to accurately assess the client tax needs, goals, etc. we then work with the client to achieve these needs and goals.

Our Dave Ramsey clients are individuals and business taxpayers who are in need of all or any of the following specialized tax services:

• Professional tax preparation: we prepare various tax returns, we provide our client a tax organizer also known as a "deduction finder" to make sure the client captures all their deductions and minimize their taxes legally from the get go. Tax preparation by a tax professional entails specialized knowledge and know how, like maximizing your deductions legally while avoiding errors that could lead to an audit by the IRS and or the state.
• Blue Sprpings Back taxes help: we work with delinquent taxpayers in resolving their back years tax matters, such as unfiled tax returns, filing regular returns in lieu of IRS' SFRs substitute for returns, tax compliance issues, releasing tax levies, garnishments, and liens.
• IRS & State tax audits: we represent our clients before the IRS and various state tax agencies such as the FTB Franchise Tax Board, BOE sales tax board of equalization, EDD employment development department. Our clients do not meet or get intimidated by the tax auditor, we obtain a power of attorney and represent and protect the client accordingly. We review all tax returns, records, etc. We assist the client in reconstructing their rerecords, and preparing for a successful audit.
• Payroll employment 941 tax problems: many employers find themselves at odds with the IRS, business owners are great in managing their business, increasing sales, managing customers and vendors. When cash flow is tight, they might incur a payroll tax problem, and the IRS would make unrealistic demand for full payment and start levying the business' bank accounts, accounts receivables, etc. We know you have rights, we know your options, and we make sure you get the best resolution for the lowest amount possible.
• Blue Springs Tax planning: our clients keep their taxes at a minimum by conducting appropriate tax planning strategies to legally minimize their tax liability. Our tax planning and coaching service quizzes clients on their families, homes, jobs, businesses, and investments, then recommends specific strategies and concepts for saving tax. We package those recommendations in plain English, to deliver the savings they really want. Proactive tax planning is the key to keeping more of what you make. Taxpayers need proactive tax planning help more than ever before, we identify and explore opportunities with you to cut your tax bill.
• Estate and Fiduciary tax: we offer professional estate, trust and gift tax return preparation and planning, for both federal and all states. We assist our clients by looking for post-mortem planning opportunities that may save their estate significant tax expense. Even though a federal estate tax return may not be due, post-mortem planning should be considered to help ease the tax liability of the surviving spouse’s estate.

Do not compromise on your Blue Springs tax service provider, call us for a free and confidential 15 minute consultation at 1-816-220-2001.

Tax Debt Relief Services

Payment Plan / Installment Agreement:

The IRS will almost always accept some type of payment arrangement for past due taxes. In order to qualify for a payment plan with the IRS you must meet the following rules and provide the IRS with this information:

• You must have filed all tax returns. (It's OK to owe money but you must file)
• You will need to disclose all assets owned including all cash and bank accounts.
• You must not have adequate cash available in a checking, savings, money market, or brokerage account to pay the IRS.
• You must not have the capacity to borrow the amount owed to the IRS from other sources (i.e., a second mortgage on your home).
• You must not have adequate equity in a retirement account from which you can borrow or liquidate; for example, IRA's or 401K's.

Assuming that you comply with the above list, then you can proceed to arrange a repayment of taxes with the IRS. The negotiation with the IRS will either take place over the phone with ACS (Automated Collection System), or in person with an IRS Revenue Officer.

The total dollar amount you owe usually dictates with whom the negotiations will be handled. Typically, IRS Revenue Officers are not involved in cases where the amounts owed are less than $25,000. The IRS will ask you to complete a personal financial statement and if a business is involved, then you will need a business financial statement. The IRS has determined allowable monthly expenses for individuals, which will be matched against your actual monthly expenses. The difference between your monthly income and your allowable monthly expenses will be the amount that the IRS will require you to pay on a monthly basis.

These monthly payments will continue until your outstanding tax liabilities are paid in full. WARNING! The IRS continues to add penalties and interest while you are making monthly payments.

This may cause you to be paying what you consider a large monthly payment to the IRS and your outstanding balance may in fact be increasing due to additional penalties and interest.

The IRS will not explain this to you! Be careful!

Penalty Abatement:

The IRS assessed taxpayers $26,515,093 (that's almost 27 Billion Dollars) in penalties during 2017. This is a huge figure.

If you're one of these taxpayers, there is hope. Taxpayers that are hit with IRS penalties can request the penalties to be abated. Abated means to completely or partially be removed. In many cases where a taxpayer requests abatement, the IRS removes 100% of the penalty.

The IRS requires that you have a good reason to request penalty abatement. What qualifies as a good reason? It depends on the circumstances involved with your particular situation.

The IRS procedures for deciding who qualifies for penalty abatement and for what reason seem to differ in each case. The best thing you can do is to request that the IRS abate your penalties by providing the circumstances surrounding your situation.

Audit Reconsideration:

This little known IRS program can be used to reopen a closed audit. The IRS rules on audits are very clear and when an audit is over it's usually over.

However the IRS has this program to handle situations where the taxpayer didn't get a fair deal in the original audit. For example the taxpayer may have never attended the original audit because they never received the audit letter or the taxpayer didn't understand what was going on and failed to provide the IRS information they requested.

There are many situations in which a taxpayer may qualify for Audit Reconsideration. The point is that any taxpayer that feels they didn't get a fair deal in their original audit can make a request for audit reconsideration.

Sometimes many years have gone by before taxpayers realize how much they owe the IRS for an old audit. Even in these cases where the time limits to appeal or file a tax court petition have long since expired, the taxpayer can still request audit reconsideration.

When the IRS agrees to audit reconsideration the taxpayer's case is assigned to an auditor to reopen the taxpayers audit. The taxpayer is then given the opportunity to have the original audit changed.

IRS Tax Appeals:

What is an Appeal? An Appeal is a request by a taxpayer that does not agree with an IRS decision. The action of filing an appeal puts the IRS on notice that the taxpayer doesn't agree with the IRS and is seeking a meeting to change the IRS decision.

The goal of the IRS Appeal Division is to "settle" disputes between the IRS and taxpayers.

The most common IRS decision which is appealed is that of an IRS Audit where the IRS has increased the taxpayer's tax liability. Often this increase includes additional penalties and interest.

The taxpayer must file an Appeals request within a certain time frame and follow the IRS guidelines for a valid Appeal's request. If a taxpayer doesn't file their Appeal request correctly and on time, they may lose their opportunity to have an Appeals officer listen to their side of the story.

Offer In Compromise - OIC:

The IRS Offer in Compromise program provides taxpayers that owe the IRS more than they could ever afford, a chance to pay a small amount as a full and final settlement. This program also offers taxpayers that don't agree that they actually owe the taxes in the first place, a chance to file an Offer in Compromise and have those tax liabilities reconsidered.

The Offer in Compromise program allows taxpayers to get a fresh start. All back tax liabilities are settled with the amount of the offer. All federal tax liens are released upon IRS acceptance of an Offer in Compromise and payment of the amount offered. An offer filed based on the taxpayers inability to pay the IRS looks at the taxpayer's current financial position and considers their ability to pay as well as their equity in assets. Based on these factors, an Offer amount is determined.

Taxpayers can compromise all types of IRS taxes, penalties and interest. Even payroll taxes can be compromised. The IRS accepts approximately 50% of all Offers filed with the average amount accepted is 14 cents on every dollar owed. If you qualify for this program you can save thousands of dollars in taxes, penalties and interest.

IRS Collection Appeal:

The Collection Appeal is an Appeal by a taxpayer that has been threatened with an IRS Levy or Seizure. This threat could have been received either verbally or in writing. The IRS allows you to file a Collection Appeal in these situations before they follow through on their levy or seizure. The Collection Appeal is filed on a one page form where the taxpayer is given the opportunity to explain how they think the situation could be solved without the IRS levy or seizure.

Your Appeal is assigned to an Appeals Officer who is required to make a decision on your Appeal within five days.

Expiration Of Statute:

The IRS has 10 years from the date of assessment (usually close to the filing date) to collect all taxes, penalties and interest from the taxpayer. The taxpayer does not owe the IRS anything after the 10-year date has passed.

As with all IRS rules, there are exceptions to this rule. Some examples are, if the taxpayer agrees in writing to allow the IRS more time to collect from them or if the taxpayer files bankruptcy during the 10 year period. In both of these situations the period for the IRS to collect is extended for a specific time.

Taxpayers that are approaching this 10-year date should request copies of their IRS transcripts to verify the assessment date, so they can accurately compute when the 10-year statue to collect will expire.

If the IRS is attempting to collect a tax liability which has expired under the 10 year statue, then the tax payer must inform the IRS in writing that they no longer have the right to collect this tax liability. If the taxpayer is correct, the IRS will write off the tax liabilities which have expired.

Innocent / Injured Spouse:

Taxpayers often find themselves in trouble with the IRS because of their spouses or Ex-spouse's actions. The IRS realizes that these situations do in fact occur.

In order to help taxpayers that are being subjected to IRS problems because of their spouse's actions, the IRS has come up with guidelines where a person may qualify as an innocent spouse. This means that if a taxpayer can prove they fit in those guidelines, then they may not be subject to the taxes caused by their spouses or ex-spouses. The IRS is currently considering new regulations, which would make it even easier to qualify as an innocent spouse.

Bankruptcy:

The IRS doesn't like to talk about the use of Bankruptcy to reduce tax liabilities, but the reality is that many IRS taxes, penalties and interest do qualify for complete discharge in Bankruptcy.

In order for a taxpayer to use the Bankruptcy laws to avoid paying income taxes, the taxpayer's income tax liabilities MUST QUALIFY. Many taxpayers file bankruptcy without first understanding the rules to qualify their own income tax liabilities. This often results in not discharging income taxes that could have been discharged if the taxpayer had understood the Bankruptcy laws.

The most common types of taxes eligible for discharge in bankruptcy are old individual income taxes. Taxes, which are not eligible for discharge in bankruptcy are Civil Penalties for payroll taxes.

Tax Tips for IRA Owners

There are both opportunities and pitfalls for IRA owners, and while you definitely don’t want to get caught up in a pitfall, you may want to take advantage of the opportunities. IRAs come in two varieties: the traditional and the Roth. The traditional generally provides a tax deduction for a contribution and tax-deferred accumulation, with distributions being taxable. On the other hand, there is no tax deduction for making a Roth contribution, but the distributions are tax-free.

So, it leaves taxpayers with a significant decision, with long-term consequences of whether to contribute to traditional or Roth IRA. If you can afford to make the contributions without a tax deduction, then the Roth IRA is probably the better choice in most circumstances. However, some high-income restrictions limit the deductibility of a traditional IRA and the ability to contribute to a Roth IRA.

Pitfalls – Here are some of the pitfalls that can be encountered with IRAs:

• Early withdrawals – IRAs were designed by the government to be retirement resources, and to deter individuals from tapping these accounts before retirement they added what is called an early withdrawal penalty of 10% of the taxable amount of the IRA distribution. The penalty generally applies for distributions made before reaching age 59-½, but there are some exceptions to the penalty.
   
• Excess contributions – The tax code sets the maximum amount that can be contributed to an IRA annually. Contributions in excess of those limits are subject to a nondeductible 6% excise tax penalty, and this penalty continues to apply each year until the over-contribution is corrected.
   
• Multiple rollovers – A rollover is where you take possession of the IRA funds for a period of time (up to 60 days) and then redeposit the funds into the same or another IRA. Only one IRA rollover is allowed in a 12-month period and all IRAs are treated as one for purposes of this rule. If more than one rollover is made in a 12-month period, the additional distributions are treated as taxable distributions and the rollover is treated as an excess contribution, with both causing significant tax and penalties. Rollovers can be avoided by directly transferring assets between IRA trustees.
  
• No Traditional IRA contributions in year reaching age 70½ - Individuals cannot make a Traditional IRA contribution in the year they reach the age 70½ or any year thereafter. This rule doesn’t apply to Roth IRAs. Contributions to a traditional IRA made in the year you turn 70½ (and for subsequent years) are treated as excess contributions and are subject to the nondeductible 6% excise tax penalty until corrected.
  
• Failing to take a required minimum distribution (RMD) – Individuals who have traditional IRA accounts must begin taking RMDs in the year they turn 70½ and in each year thereafter. However, the distribution for the year when an individual reaches age 70½ can be delayed to the next year without penalty if the distribution is made by April 1 of the next year. Failing to take a distribution is subject to a penalty equal to 50% of the RMD. The IRS will generally waive the penalty for non-willful failures to take the RMD, provided the individual has a valid excuse and the under-distribution is corrected. The RMD rules don’t apply to Roth IRAs while the owner is alive.

Opportunities

Late contributions – If you forgot to make an IRA contribution or just decided to do so for the prior year, the tax law allows you to make a retroactive contribution in the subsequent year, provided you do so before the unextended April filing due date. As an example, you can make an IRA contribution for 2018 through April 15, 2019. This is also a benefit for taxpayers who were not previously sure they could afford to make a contribution.

Switch the type of IRA – If you make an IRA contribution for a year, tax law allows you to switch the designation of that contribution from a traditional IRA to a Roth IRA, or vice versa, provided you do so before the unextended April filing due date.

Backdoor Roth IRA – Contributing to a Roth IRA is not allowed if the individual’s modified adjusted gross income (AGI) exceeds a specified amount based on filing status. For example, the limits for 2019 are $203,000 if filing a joint return, $10,000 if filing married separate, or $137,000 for all others. If a high-income taxpayer would like to contribute to a Roth IRA but cannot because of the income limitation, there is a work-around that will allow the high-income individual to fund a Roth IRA. Here is how that backdoor Roth IRA works:

1. First, a contribution is made to a traditional IRA. For higher-income taxpayers who participate in an employer-sponsored retirement plan, a traditional IRA is allowed but is not deductible. Even if all or some portion is deductible, the contribution can be designated as not deductible.
   
2. Then, since the law allows an individual to convert a traditional IRA to a Roth IRA without any income limitations, the non-deductible traditional IRA can be converted to a Roth IRA. Since the traditional IRA was non-deductible, the only tax related to the conversion would be on any appreciation in value of the traditional IRA before the conversion is completed.
   
   One potential pitfall to the backdoor Roth IRA is often overlooked by investment counselors and taxpayers alike that could result in an unexpected taxable event upon conversion. For distribution or conversion purposes, all of your IRAs (except Roth IRAs) are considered one account, and any distribution or converted amounts are deemed taken ratably from the deductible and non-deductible portions of the traditional IRA, and the portion that comes from the deductible contributions would be taxable. So, the conversion tax implications should be considered before employing the backdoor Roth strategy.

Alimony as compensation – In order to contribute to an IRA, an individual must receive “compensation.” For IRA purposes, compensation includes taxable alimony received. Thus, for purposes of determining IRA contribution and deduction limits, individuals who receive taxable alimony and separate maintenance payments may treat the alimony as compensation, for purposes of making either a traditional or a Roth contribution, allowing alimony recipients to save for their retirement.

Spousal IRA – One frequently overlooked tax benefit is the “spousal IRA.” Generally, IRA contributions are only allowed for taxpayers who have compensation (the term “compensation” includes wages, tips, bonuses, professional fees, commissions, taxable alimony received, and net income from self-employment). Spousal IRAs are the exception to that rule and allow a non-working or low-earning spouse to contribute to his or her own IRA, otherwise known as a spousal IRA, based upon his or her spouse’s compensation (as long as it is enough to support the contribution).

Saver’s credit – The saver’s credit, for low- to moderate-income taxpayers, helps offset part of the first $2,000 an individual voluntarily contributes to an IRA or other retirement plans. The saver’s credit is available in addition to any other tax savings resulting from contributing to an IRA or retirement plans. Like other tax credits, the saver’s credit can increase a taxpayer’s refund or reduce the tax owed. The maximum saver’s credit is $1,000 ($2,000 for married couples if both spouses contribute to a plan). The application of this credit is very limited. Please call for additional details.

IRA-to-charity direct transfers – Individuals age 70½ or over must withdraw annual RMDs from their IRAs. These folks can take advantage of a tax provision allowing taxpayers to transfer up to $100,000 annually from their IRAs to qualified charities. This provision may provide significant tax benefits, especially if you would be making a large donation (although it also works for small amounts) to a charity anyway.

Here is how this provision, if utilized, plays out on a tax return:

(1) The IRA distribution is excluded from income;
(2) The distribution counts toward the taxpayer’s RMD for the year; and
(3) The distribution does NOT count as a charitable contribution.

At first glance, this may not appear to provide a tax benefit. However, by excluding the distribution, a taxpayer with itemized deductions will lower his or her AGI, which will help with other tax breaks (or punishments) that are pegged at AGI levels, such as medical expenses, passive losses, and taxable Social Security income. In addition, non-itemizers essentially receive the benefit of a charitable contribution to offset the IRA distribution.

Please call this office for further details or to schedule an appointment for some IRA planning unique to your circumstances.   816-220-2001 or Online